Commission Impossible? - Shaping places through strategic commissioning Dr Laura White Edited by Tom Shakespeare With foreword by Rt Hon Hazel ...

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Commission Impossible? - Shaping places through strategic commissioning Dr Laura White Edited by Tom Shakespeare With foreword by Rt Hon Hazel ...
Commission Impossible?
            Shaping places through strategic commissioning
                                                          Dr Laura White
                                               Edited by Tom Shakespeare
                                  With foreword by Rt Hon Hazel Blears MP
About Localis
Who we are
Who we are Localis is an independent think-tank dedicated to issues related
to local government and localism.We carry out innovative research, hold a
calendar of events and facilitate an ever growing network of members to
stimulate and challenge the current orthodoxy of the governance of the UK.

Our philosophy
We believe in a greater devolution of power to the local level. Decisions should
be made by those most closely affected, and they should be accountable to the
people which they serve. Services should be delivered effectively. People should
be given a greater choice of services and the means to influence the ways in
which these are delivered.

What we do
Localis aims to provide a link between local government and the key figures in
business, academia, the third sector, parliament and the media.We aim to
influence the debate on localism, providing innovative and fresh thinking on
all areas which local government is concerned with.We have a broad events
programme, including roundtable discussions, publication launches and an
extensive party conference programme.

Find out more
Please either email or call 0207 340 2660 and we will be
pleased to tell you more about the range of services which we offer. You can
also sign up for updates or register your interest on our website.

                                        About Mears

Mears is the UK’s leading provider of social housing maintenance and care
services. More than 13,000 people work at Mears and every year we are
welcomed into the homes of over 500,000 people.

Mears working in partnership
Mears continually looks for ways to drive service improvements. We do this
in partnership with local authorities, housing associations, health authorities,
charities, local communities and individuals. We use our experiences to invest
in innovations that secure long-term outcomes rather than short-term targets.

Why is Mears supporting this publication?
Commissioning has a vital role to play in improving the quality of life for groups
and individuals which is why we welcomed the opportunity to support Localis
and Essex County Council in delivering this timely and valuable report.

To find our more please contact:
Abigail Lock
Head of External Relations (Interim)
0780 8647836


      Acknowledgements                               3

      Foreword by Rt Hon Hazel Blears MP             4

      Executive Summary                              6

      Introduction                                  10

    1 What is Strategic Commissioning?              12

    2 Approaches to Strategic Commissioning         24

    3	What Does a Strategic Commissioning Council
       Look Like?                                   38

      Conclusion                                    45

      Appendix                                      48

      Bibliography                                  53


This project was led by Dr Laura White, Policy & Strategy Officer at Essex
County Council and edited by Tom Shakespeare, Director of Policy and
Research at Localis.

We would like to thank numerous others from Essex County Council, Mears
and Localis who contributed to the research and drafting at all stages. Finally,
we would also like to acknowledge the input and insight of the following
individuals throughout the research and consultation, although this list is by
no means exhaustive: Laurence Ainsworth (Chester West & Cheshire Council),
Louise Beatty (Cabinet Office), Ian Campbell (Wakefield Council), Cllr Paul
Carter (Kent County Council), Justin Griggs (NALC), Paul Jenner (3SC), Cllr
Mike Jones (Chester West & Cheshire Council), Emma Jupp (Age UK), Henry
Kippin (2020 Public Services Hub), Ian Lewis (Hackney Council) , Gordon
Murray, Kate Mulley (Action for Children), John O’Brien (London Councils),
Helen Randall (Towers and Hamlins), Cllr Steve Reed (Lambeth Council), Steve
Spiers (South Gloucestershire Council), John Tizard (LGIU), Nicholas Webb
(Camden Council).

                 Foreword by
       Rt Hon Hazel Blears MP

    Councils have sometimes struggled with competing priorities when trying to
    strategically commission services and in the past have perhaps been too keen to
    rely on a small number of commissioning models that have arisen from political
    instead of practical concerns.

    These two somewhat stylised models have inherent flaws. The Nicholas Ridley
    manifestation of hands-off government encouraged councils to act as holding
    companies, meeting once a year to award contracts to private companies and
    focusing solely on economic value and the bottom line. On the other hand, the
    classic statist model, which some councils have used to provide all services from
    leisure centres to adoption services, delivered a controlling model that lacked
    personalisation and overlooked community involvement.

    The challenge for councils is to find a middle way between these extremes
    – finding new relevant models that can effectively and efficiently commission
    services that achieve good value. By highlighting some of the innovative
    examples of strategic commissioning from across the country, this timely report
    offers an extremely useful contribution to the debate about the future of local

    The report specifically refers to the London Borough of Lambeth and the co-
    operative council model that is being pioneered by Cllr Steve Reed. It is
    empowering local residents, community groups and mutuals to shape and
    take control of their local services, embracing and using local knowledge to
    commission services that really work.

    There is real innovation going on in my own constituency too. Salford Council’s
    ‘Unlimited Potential’ is a social enterprise that employs more than 40 people
    working on health projects commissioned by the council and in partnership
    with the NHS targeted at those most in need of support, and this year will be
    reinvesting their surplus back into the local community though an Innovation
    Fund, helping local people to help themselves

    As these examples and the report shows, councils are taking different
    approaches to tackle the variety of challenges that their areas face. The reason
    that these have been successful is because they represent a break from stale
    models of the past and show how commissioning can be developed to localise
    and personalise services.

The challenge for local councils is to determine what exactly they want to achieve,
and then how best to commission to implement their strategic goals. This will
differ from place to place and each council’s aims should reflect the needs and
aspirations of their local community with renewed focus on accountability.

People need to know who is responsible for the services they use, and it is the
role of councils to ensure adequate and improving service provision, but this
can only reflect what local people want if they feel engaged in the process.
Much of this relies on a redefinition of the interaction between citizen and state
and moves away from contracted transactions to a relationship placing both on
a more equal footing.

By commissioning more effectively and collectively not only will councils benefit
from greater efficiencies that will allow savings to be made in a difficult financial
climate, but working with local people and giving them greater involvement
and responsibility over the way that their money is being spent will bring
together service providers and service users in partnership to drive continual

The report’s conclusions are relevant for central government and councils of all
political persuasions, and will undoubtedly become increasingly pertinent in the
years ahead.


                                                            Executive Summary

                                          The time is right for councils to radically rethink how services are delivered
                                          The role of councils is changing in the face of economic pressures and the
                                          Government’s plans to decentralise power from Whitehall to local government
                                          and beyond. This report suggests that councils have a once in a generation
                                          opportunity to cement their position of enhanced power by taking a ‘strategic
                                          commissioning’ approach to the delivery of local services.

                                          Strategic commissioning, defined broadly as: “the process of identifying needs
                                          within the population and developing policy direction/service models and the
                                          market to meet those needs in the most appropriate and cost effective way”,1
                                          offers opportunities for councils to better fulfil their role as ‘place-shapers’ of
                                          their local areas. The commissioning process is best visualised as a back-and-
                                          forth ‘steering wheel’ motion between need assessment, the market, resources
                                          and delivery, rather than the typically cyclical model used at present. This
                                          places a particular emphasis on a continuous dialogue between various

                                          Local strategic commissioning involves a move away from an outdated focus
                                          on cost which dominated the Compulsory Competitive Tendering (CCT) era of
                                          the 1980s, through to the centralised ‘best value’ regime which dominated the
                                          Government’s approach to local government over the last decade, towards a
                                          more localist understanding of ‘value’.

                                          Councils have already recognised the importance of strategic commissioning,
                                          and 81% of council leaders and chief executives surveyed for this report say
                                          they are considering taking on an even greater strategic commissioning role in
                                          the near future.2 In this report, we take the position that strategic commissioning
                                          should be ‘provider neutral’, focusing on local need and the best pathways
                                          to deliver that need. The public, after all, prioritise an effective public service
                                          above and beyond who provides that service.

                                          Strategic commissioning offers substantial benefits for councils
                                          and local residents
                                          By focusing on what is most important for local residents, strategic commissioning
                                          can result in a wide range of benefits, including:

                                          • Greater efficiency – The commissioning process opens up new possibilities
                                            to deliver services in more efficient ways, as well as opportunities to take
                                            advantage of initiatives such as pooled budgets and early intervention
                                            investment (eg social impact bonds) to deliver long-term value for money for
      ational Procurement Strategy, in
     ECC (2010) ‘Procurement Strategy:      council-tax payers.
     2011/12-2013/14’, p.6.               • A focus on outcomes, not processes – By studying the needs of local residents,
    2 Localis survey – see Appendix        and by measuring the long term local ‘value’ of particular services, councils

  can ensure the provision of services which deliver the most important
  outcomes for residents – improving lives, not ticking boxes.
• Stimulating local enterprise – By taking a comprehensive strategic
  commissioning approach, councils could leverage their significant resources
  and significant buying power to create new markets in the provision of
  services, which could create new jobs and growth, as well as the potential
  to drive competition, choice and innovation in local services.
• Focus on what is strategically important – By ‘externalising’ the provision of
  services, there may be opportunities to resolve any conflict in the council’s role
  as both commissioner and provider of services. More specifically, councillors
  may be able to take a more strategic approach by focusing solely on the
  commissioning and scrutiny of services rather than the day-to-day provision.

Most councils predict a shift in service provision from in-house to voluntary
organisations (82%), public sector shared initiatives (80%), SMEs (75%) and
large private organisations (68%), with only 5% of councils saying that more
services will be delivered in-house.

Some councils are already looking at innovative ways to deliver better services
Some councils are already using, or plan to use, innovative approaches to
deliver on their strategic commissioning plans, including outcomes focussed
contracts (97%), pooled budgets (86%), flexible contracts (84%), payment
by results (78%) and social return on investment models (53%). A handful of
councils have already made significant steps towards becoming wholesale
strategic commissioners of local services. These include:

• Mears and Hertfordshire County Council – This is a joint initiative between
  a private company and a local authority to implement a payment-by-results
  model for reducing contact time, promoting independence and improving
  outcomes for users of a ‘Telecare’, enabling people to manage their long
  term health conditions whilst living independently. This way, there is an
  incentive for the provider to ‘perform’ and for both the provider and council
  to make financial savings
• London Borough of Lambeth – The co-operative council, as trialled by
  Lambeth, is an innovative model which aims to involve local residents in
  co-producing and co-commissioning their services and pooling personal
  resources to create micro-mutuals. The council remains at the core of the
  commissioning process, adopting a facilitating role. Councillors and officers
  will retain their responsibility for safeguarding and scrutiny, but will also
  effectively take on the role of community organisers.
• Essex County Council – By providing customer-centric ‘trip-advisor’ style
  performance data ‘Essex Assist’ on their local care services, ECC have
  created a platform from which will promote good quality service providers
  and drive up standards .They have also set up a social care trading company
  ‘Essex Cares’ which has helped to redefine the relationship between staff
  and customers by empowering staff. This has led to ‘Essex Cares’ achieving
  a 99% user satisfaction rating.
• Selby District Council – Selby are one of a number of councils taking steps
  to decouple the council’s decision making function from the provision of
  services by creating a new service delivery vehicle ‘Access Selby’, which
  may involve a mixture of private, public and third sector ownership.

There are barriers to achieving the strategic commissioning approach
Despite the steps taken by of a number of councils, there remain a number of
barriers to the sector-wide implementation of a wholesale strategic commissioning
approach. These include:

                                                               Executive Summary

                                         • Barriers to innovation – One of the biggest barriers to innovation is the
                                           limited market and the limited engagement between the public sector and
                                           providers. However, despite this, councils were optimistic that opportunities
                                           would be given for external organisations to enter the market in the future,
                                           with approximately 80% saying that more contracts would be given to
                                           voluntary and community sector (VCS) and small and medium enterprises
                                           (SMEs), and 68% to larger companies. In addition, risk is so narrowly
                                           defined, and the political dimension of commissioning is shied away from,
                                           particularly in times of austerity. It is important not just to recognise that
                                           commissioning is about political decisions, priorities and fundamentals, but
                                           to positively embrace this.3
                                         • Contractual barriers – There is a residual fear that by taking a more
                                           strategic commissioning approach, councils will lose sovereignty over
                                           service provision. Whilst opportunities exist to break-up, adjust the length
                                           or renegotiate contracts, there still seems to be a degree of rigidity in local
                                           government. For example, a 2008 Ipsos MORI survey noted that 66% of
                                           the sampled PFI contract managers devoted less than half of their time to
                                           managing the contract; it also noted that 42% of the contracts sampled had
                                           failed to levy any performance deductions in the past 12 months. These two
                                           statistics point to the crux of the problem; contract management is woefully
                                           under-resourced and contract managers are often unaware of their rights
                                           under the contract or how to enforce them.
                                         • Information barriers – Another major barrier is the lack of relevant information
                                           to make informed commissioning decisions. For example, 75% of councils
                                           surveyed thought that the availability of clearer national benchmarking data
                                           on provider performance would help with the commissioning process, and
                                           90% thought that there were barriers around sharing data. Internal council
                                           communication between officers and members, and between departments
                                           was also cited as a barrier.
                                         • Cultural barriers – Few councils have any real confidence that strategic
                                           commissioning can take place without a significant shift in culture towards
                                           a less siloed approach to the delivery of services, with councillors taking on
                                           greater roles as community advocates and scrutinisers of performance. In
                                           our survey 91% of councils said that culture was a barrier to a more strategic
                                           commissioning approach, 65% said that the internal council structure was a
                                           barrier to strategic commissioning and 88% thought that the role of elected
                                           members would need to change. Furthermore, 70% said they needed more
                                           commissioning experts in order to make the transition.
                                         • Barriers to joint working – There was an almost unanimous view (91%)
                                           that councils should take the lead on the strategic commissioning of local
                                           services across the public sector. Yet despite this, 70% thought that national
                                           structures were a barrier and 97% said there were challenges around
                                           reforming the siloed nature of budgets. Much emphasis has been placed
                                           on rhetorical partnership working but within the constraints of individual
                                           budgets, practical progress in terms of holistic and whole life provision can
                                           be limited. Within the council itself, there is a siloed separation of subject
                                           matter experts, commissioners, procurement managers and corporate policy
                                           and high-level priority setting.
                                         • Capturing and measuring value for users and communities – This is a challenge
                                           both in terms of practical application and measurement and assessment. There
                                           have been many efforts to develop models to do measure value, but as yet,
                                           there has been limited progress in finding workable solutions. In the absence
                                           of being able to definitively measure social return, a focus on outcomes (be
                                           that contractually or otherwise) is one answer, and this is gaining credence
      ee, for example, Unison, APSE &     nationally. However, these practices are currently very sporadic, and in many
     LGIU (2011) Think Twice.              cases products are commissioned rather than services.


This report makes a number of recommendations for central and
local government
The report draws out a number of lessons, including a number of recommendations
for central and local government, under nine broad themes:

• Address siloed nature of public services – Central Government should offer
  continued support and resources for pooling budgets, data sharing across
  the public sector and giving councils greater financial flexibility to better
  reflect the long-term nature of investments in early intervention initiatives.
  Health and Wellbeing boards should also be given ‘teeth’ to enable effective
  partnership commissioning.
• Focus on outcomes not processes – Central Government should promote
  national availability of benchmarking data on provider performance to
  enable commissioners to make informed decisions. Councils should be
  open minded about methods for achieving savings before moving to tender
  eg new providers, local authority trading companies (LATCs), support for
  Voluntary and Community Sector (VCS) or shared services.
• Support a thriving market for all sectors – Central Government should
  support councils in trying to evidence social return. Councils should adopt
  various mechanisms to improve service design and procurement – including
  exploring innovative methods for supporting market and building capacity
  for VCS and SMEs before reaching procurement stages, and should look to
  utilise innovative funding models to revolutionise the way that services are
• Redefine risk – Councils should work with partners to redefine risk, internally
  and externally, to ensure that money is spent on services which deliver the
  long term outcomes. They should amend SME risk categorisations so that
  small stable and profitable businesses that are high risk due to their size in
  relation to the contract value can still be awarded suitable contracts.
• Create smarter, more flexible contracts – Councils should capitalise more on
  opportunities to value test and re-negotiate their contracts.
• Redefine the roles and responsibilities of councillors and officers – Councils
  should support elected members to take on a greater role as community
  advocates and actively encourage members to take up scrutiny roles.
  They should embrace the culture change towards becoming strategic
  commissioners through officer and member training.
• Make commissioning distinct from procurement and outsourcing – Councils
  should move from transactional to transformational savings, and work
  collectively to promote a clear vision of what commissioning means,
  including how this is distinct from outsourcing.
• Work towards a new, more localist, understanding of value – Councils
  should continue to develop their own measures of local ‘value’, working
  together with other councils to compare and benchmark performance.
• Involve communities in the commissioning process – Councils should give
  greater focus to how communities and providers can be involved in the
  commissioning process and priority setting, and should encourage and
  enable residents to share information and intelligence on their experiences
  of services, using the feedback of others to inform choices.

                                                             Executive Summary


                                           ‘Strategic commissioning’ has been a popular idea in local government for many
                                           years. Whilst very few authorities would claim that it is an approach which is
                                           applied consistently across all service areas (only 7% of councils surveyed said
                                           their services were ‘mainly outsourced’), and the precise terminology differs in
                                           various political contexts, the aspiration of more effective and joined-up service
                                           design and delivery is widespread. While councils already deliver a wide
                                           range of services, from social care to waste management and from leisure
                                           facilities to local schools, the Government’s forthcoming public service reforms
                                           will make this aspiration even more imperative at the local level, and local
                                           government will have a crucial role to play.

                                           Although touching on procurement and contracting issues, this report
                                           purposefully does not make prescriptions regarding the type of service that
                                           should be commissioned or most suitable providers for any particular service.
                                           This is because, as will become clear, strategic commissioning necessitates a
                                           willingness to look at how things can be done differently and innovatively, in
                                           some cases moving beyond traditional mechanisms of council provision. This
                                           report does also not claim that there is a one size fits all solution for strategic
                                           commissioning, and a structure that works for one locality may be very different
                                           to a successful one elsewhere.

                                           Of course there have been examinations of strategic commissioning in the past,
                                           and the analysis which follows will build on this canon of research. At a time
                                           of intense deliberation about the future of public services, it is now more vital
                                           than ever that councils consider how strategic commissioning could play a role
                                           in shaping their localities. This report explores the different contexts behind
                                           commissioning and provision and considers how council structures, officers
                                           and members, in collaboration with local residents, can promote best practice
                                           across local government.

                                           The landscape for public services is changing in the face of both economic
                                           pressures, and new emerging approaches to addressing local need. The role of
                                           local government therefore is also quickly evolving as locally-devolved decision
                                           making, choice and personalisation become the norm within a broader agenda
                                           for public service reform. The time is clearly right for the strategic commissioning
                                           council, with over 80% of local authorities set to take on this role in the short-
                                           to-medium term.4

       ccording to a survey of over 100   This report will therefore explore a range of thorny issues relating to the
      councils conducted by Localis. See
      ‘A Note on Methodology’ and
                                           implementation of a more strategic commissioning approach in local
      Appendix A.                          government. The report is divided into three main sections:

• Part One – What is Strategic Commissioning? The first section draws
  together relevant literature with qualitative and quantitative evidence to
  provide a detailed context to the commissioning debate. It traces the history
  of commissioning from Compulsory Competitive Tendering in the 1980s
  through to the Best Value years and emerging calls for a better focus on
• Part Two – Approaches to Strategic Commissioning. There are many barriers
  – bureaucratic, financial, technical and specific – which arise in the standard
  commissioning process. This section addresses the procedural barriers to
  strategic commissioning, explores innovative approaches and highlights
  the key features and outcomes of good commissioning. The issues include
  the need for greater innovation in contracting and delivery, the importance
  of understanding value and commissioning for outcomes not processes the
  development of local markets, and intelligent procurement.
• Part Three – What Does a Strategic Commissioning Council Look Like?
  Drawing together the above discussions, this section focuses on the structural
  barriers to strategic commissioning, and reveals paths to improvement. It
  explores how councils are evolving (and need to evolve) in order to facilitate
  more strategic commissioning. As will be illustrated, councils across the
  country are already making strides here, but this section will highlight the
  ongoing need for less siloed council and public sector structures, as well as
  the potential for councils to embrace the emerging roles and responsibilities
  for officers and members as part of a new conception of accountability.

If the shift towards the commissioning of public services is to be truly
transformational in terms of quality, efficiency and efficacy, then it is crucial that
these barriers to commissioning strategically are overcome.

A Note on Methodology
The research which informed this report has been largely qualitative in nature.
The methods employed have included semi-structured interviews and participant
observation (through a private roundtable discussion). There has also been
extensive consultation at all stages with commissioners, academics, private and
voluntary sector providers, and commentators. This information has also been
supplemented by quantitative data obtained through a survey which explored
the theme of strategic commissioning. A questionnaire was sent to every council
in England of whom 105 responded to questions on a range of topics from
decision making processes to the delivery of services. Respondents came from
various council types, and were based in all parts of England. The results of this
survey are included in Appendix A.

The focus of the report has been on current developments relevant to strategic
commissioning and it is important to note that the models and case studies
discussed throughout are about emerging innovations to address the issues
identified, and as such do not necessarily focus on presenting results or findings.


                                                                      1. What is Strategic

                                                  The term commissioning has long been common currency in both local and
                                                  national government, and has started to be discussed more widely in the public
                                                  arena, in light of the proposed reforms to the NHS. However, there is still
                                                  a good deal of confusion as to what commissioning really means, how it is
                                                  distinct from procurement, and to what extent councils can truly be said to be
                                                  ‘commissioning’, even where they are purchasing or ‘procuring’ a wide range
                                                  of services from external providers.

                                                  Commissioning should in essence be ‘provider neutral,’5 focusing on local need
                                                  and the best pathways to deliver that need. With this in mind, commissioners
                                                  may pursue any one of a number of options including procurement from public
                                                  sector partners, private sector or third sector supply, or in-house delivery where
                                                  capacity exits. In practice then, it could also result in the adoption of a wide
                                                  variety of mechanisms: contracts, grants, shared services, local authority trading
                                                  companies or even asset transfer. At present, outsourcing itself represents only
                                                  about a fifth of total UK government expenditure.6 Provision is largely mixed
                                                  across councils in the UK with analysis from our survey revealing that around
                                                  60% of commissioners would describe the mix of provision in their council as
                                                  ‘fairly even’, with only 7% describing services as ‘mainly outsourced’.7

                                                  Since 2006 the Cabinet Office has defined commissioning as ‘the cycle of
                                                  assessing the needs of people in an area, designing and then achieving
                                                  appropriate outcomes. The service may be delivered by the public, private
       nison, APSE & LGIU (2011) Think           or civil society sectors’.8 It is worth noting however that within councils,
      Twice: The Role of Elected Members
      in Commissioning (London: Unison,           procurement, which is one means of implementing commissioning, may adopt
      APSE & LGIU).                               very similar definitions. For instance, the definition set out in the National
     6 Jameson, H (2011) Ensuring High           Procurement Strategy – the DCLG’s guidance on procurement practice in local
        Quality Public Services: recognising
                                                  government – is as follows:
        the role of the workforce in the future
        of outsourcing (London: IPA)
     7 Localis Survey (June, 2011), see             ‘Procurement is the process of acquiring goods, works and services, covering
        Appendix A.                                  both acquisitions from third parties and from in-house providers. The process
       abinet Office (2010) Modernising             spans the whole life-cycle from identification of need, through to end of a
      Commissioning: Increasing the Role
                                                     services contract or the end of the useful life of an asset.’9
      of Charities, Social Enterprises,
      Mutuals and Cooperatives in Public
      Service Delivery, accessed at www.          This compares, for example, to the following typical council definition of [19/04/11],
                                                  commissioning, which has many similarities:
       ational Procurement Strategy, in
      ECC (2010) ‘Procurement Strategy:              ‘Commissioning is the process of identifying needs within the population
      2011/12-2013/14’, p.5.                         and developing policy direction/service models and the market to meet
     10 Ibid., p.6.                                  those needs in the most appropriate and cost effective way’.10

As these definitions make clear, there are significant overlaps between elements
of procurement and commissioning, rendering close working relationships and
formal mechanisms of interaction between procurement and commissioning
functions essential. However it is also perhaps not surprising that, as research
suggests, some officers and providers struggle to make the distinction between
procurement and commissioning, a pattern which also became evident in the
fieldwork for this study.11 Moreover, it is particularly problematic if procurement is
simply categorised as the business-end of transactions, where efficiency savings
are to be made, with little consideration of how these processes of designing
appropriate tenders to meet prescribed budgets, actually relates to broader
strategic aims. In addition, the National Audit Office (NAO) has been careful to
outline the distinction between ‘cuts-driven’ and ‘intelligent decommissioning’; a
distinction which will become increasingly pertinent as more and more councils
adopt a commissioning approach against a backdrop of tightening budgets.12

Crucial to the concept of strategic commissioning is a strong consideration
of how services interact with the locality more broadly. In 2006, the Local
Government White Paper set out the importance of partnership working at the
local level, and the importance of local government as a strategic leader and
‘place shaper’. The two key tenets of this new place-shaping role were the Local
Strategic Partnerships (LSPs) and the Local Area Agreements (LAAs).13 The LSPs
represented the ‘overarching strategic partnership for an area’ and the LAAs
were introduced in 2006 as a statutory requirement for county and unitary
partners to prepare a ‘delivery plan for the strategy’, in consultation with LSP

Against the back-drop of an increasingly centralised approach to local co-
ordination, the importance of the unique role of the local authority as a place
shaper was also highlighted during the Lyons Inquiry (2006 – 2007), which
promoted a ‘wider strategic role for local government’ and the ‘creative use of          11 See, for example, Murray (2009)
powers and influence to promote the general well-being of community and its                  ‘Towards a Common Understanding
citizens’.15                                                                                 of the Differences Between
                                                                                             Purchasing, Procurement and
                                                                                             Commissioning in the UK Public
In 2007 Lyons set out the key responsibilities for a local authority as a ‘place             Sector’, in Journal of Purchasing &
shaper’ as follows:                                                                          Supply Management, 15, pp.198-
                                                                                         12 For more detail on this see National
• to exercise leadership in the joining up of resources and activities to ensure             Audit Office (2011) ‘What
  that community interest is reflected in public services.                                   Decommissioning is Not’, www.
• to use their purchasing power to shape the market and facilitate greater user     [19/08/11]

  engagement with service delivery.                                                      13 The LSPs had already established in
                                                                                             2000 to oversee the spending of
                                                                                             the Neighbourhood Renewal Funds
These features remain crucial to understanding the role of the council as a              14 DCLG (2006) Strong and
strategic commissioner. Lyons also emphasised that LAAs should be ‘developed                 Prosperous Communities: The
in a way which leaves enough space for local priorities’, as well as the significant         Local Government White Paper,
                                                                                             accessed at http://www.
barrier presented by the inflexible funding system for local government.16 This    
included a recommendation to establish outcomes-focused targets for the LAA.                 localgovernment [20/04/11]
Outcomes are defined as ‘the changes that occur for stakeholders as a result of          15 Lyons, M (2007) Lyons Inquiry into
the activity’.17                                                                             Local Government. Place-shaping:
                                                                                             A Shared Ambition for the Future
                                                                                             of Local Government, accessed at
Where does Strategic Commissioning fit in?                                         
Despite various attempts to define ‘strategic commissioning’, it remains highly              [06/04/11]

contested. The idea of taking a more strategic approach to commissioning has             16 Ibid., p.18.

emerged as part of the general trend towards exploring greater opportunities             17 Cumming, L.M. & Dick, A., Filkem,
                                                                                             G. &Sturgess, G.L. (2009) Better
for outsourcing to the private sector and has therefore often been used, or                  Outcomes (London: 2020 Public
perceived as, shorthand for ‘efficiently outsourcing in all possible service areas’.         Services Trust), p.19.

                                                 What is Strategic Commissioning?

                                              As a consequence, the truly provider neutral implications of the concept have,
                                              we believe, not been sufficiently debated to date.

                                              It is necessary then to determine what ‘strategic commissioning’ really means
                                              in the context of the broader definition of commissioning and commissioners,
                                              as set out above. To do this it is helpful to start with a simple definition. The
                                              Oxford English Dictionary defines strategic as: 1 relating to the identification of
                                              long-term or overall aims and interests and the means of achieving them; or 2
                                              designed or planned to serve a particular purpose. You can only be strategic
                                              then in the pursuit of specified aims, interests and purpose.

                                              With this in mind, we need to consider what it might mean to act ‘strategically’
                                              in the process of weighing up need, outcomes and cost. Since the purpose of
                                              local government is to serve the community it represents, the key strategic role
                                              for councils is to facilitate an approach to fulfil the needs and requirements of
                                              that community and to act as a ‘place shaper’ in order to sustain this approach
                                              in the long term.

                                              Who/What is a Commissioner?
                                              Central to the definition of commissioning, although often ignored, is the
                                              question of who/what is a commissioner? Interview responses showed a
                                              variety of interpretations of commissioning, strategic commissioning and who
                                              is the commissioner. Many, as is to be expected, used commissioning and
                                              procurement as virtually synonymous. Most talked only about commissioning
                                              as a centralised vehicle for outsourcing services (or investing externally) to the
                                              private or voluntary and community sector (VCS). However, at the same time
                                              it is evident that there is also a real awakening to the role of individuals and
                                              communities as commissioners. There is currently a good deal of interesting
                                              work encouraging us to think differently about who should take the lead in the
                                              design, delivery and assessment of public services, looking at the role of co-
                                              production, and social productivity for example.18 These sentiments, although
                                              not always expressed in these particular terms, were also reflected in the aims
                                              and aspirations of many of the people who contributed to this research.

                                              Therefore, commissioners need not be just councils as organisations, but might
                                              also be individuals, communities or councillors themselves. And commissioning
                                              starts with the democratic process. So ‘strategic’ commissioning is therefore
                                              not just about decisions made by key individuals but about how priorities are
                                              shaped and pursued, and how outcomes delivered for residents. Discussing
                                              commissioners in this much broader way helps us to take a step back from some
                                              of the more entrenched practices within elements, particularly procurement, of
                                              the commissioning process.

                                              Another challenging issue related to the question of ‘who commissions?’ is
                                              the extent to which councils can be both commissioners and providers. At the
                                              heart of the debate is to what extent innovation and insight is really captured
     18 O
         n co-production, see, for           from the very beginning of the commissioning process – that is, developing
        example, Boyle, D., Slay, J. &
        Stephens, L. (2010) Public Services   and setting priorities, analysing need and designing services, as well as giving
        Inside Out: Putting co-production     providers more opportunity to feed into procurement processes and tenders.
        into practice (London: Nef &          Within councils however, there are still question marks over the extent to which
        NESTA). On social productivity,
        see, for example, 2020 Public         the provision of services interferes with strategic commissioning process, or
        Services Hub & LSIS (2011) The        whether the ‘externalisation’ of provision might enable councillors to take a
        Further Education and Skills Sector   more strategic, ‘place-shaping’ approach. This report attempts to consider
        in 2020: A social productivity
        approach, accessed at www.            all of these complexities in the discussion of strategic commissioning which [30/05/11]                 follows.


Visualising Strategic Commissioning
The commissioning process should be one which spans the breadth of the
council and begins at the very top of the decision making structure and at the
very grassroots simultaneously. In this way, the commissioning process should
begin and end with the councillor’s democratic relationship with residents.
There are a number of key features of commissioning as captured in the below
Cabinet Office cycle.19

1.   Assessing needs
2.   Identifying priority needs and outcomes
3.   Designing the specification which will achieve these outcomes
4.   Sourcing the providers to meet this specification
5.   Managing the delivery of the outcomes
6.   Monitoring, reviewing and learning from delivery to inform future

The commissioning process is usually described as a cycle because the above
stages are ongoing, and interrelated. In fact, a standard cyclical representation
probably doesn’t go far enough – it might be more helpful to visualise the
process as a steering wheel, because it is important to understand that the
different stages are inherently indistinct and will happen in no particular order,
and often simultaneously. The stages of the process go back and forth, rather
than consecutively. With this in mind, the below diagram is particularly helpful.

      Figure 1

      Strategic Commissioning Process operates as a Steering Wheel and Moves Back
      and Forth – it is not Cyclical

                                             Gaining top level
                                         multi-agency engagement
                                                and sign up
                                                                                 Assessing needs and
     Monitoring, reviewing and
                                                                                 mapping the market
     learning from delivery and
     performance to inform
     future commissioning                                                Ensuring the involvement of
                                                                         service users and customers
                                                                          as co-developers of services
     Managing contacts
     and the delivery of                                                             Aligning with the
     the impacts and results                                                          national drivers
     Sourcing the providers                       Process
                                                                               Identifying the priority
     to meet the specification                                                     needs and impacts

     Designing the specification                                          Identifying the full breadth
     that will achieve greatest impact                                 of available multi-agency and
                                                                                community resources
     Managing the market and
     building capacity
                                                                                    Synthesis analysis

                                          Ensuring effectiveness and
                                         efficiency decommissioning,
                                         reshaping andservice design

                                                                                                          19 Cabinet Office (2010),
      Source: Essex County Council                                                                            Modernising Commissioning,

                                                               What is Strategic Commissioning?

     This is an excellent representation of the many complex facets of effective
     commissioning. Of note in particular for the discussion which follows is the
     ‘synthesis analysis’ which is the process by which an understanding of need,
     the market and ongoing effectiveness are reconciled with an appreciation of
     the available resources.

        Key Lessons

        •   It is important to break down misconceptions around commissioning as
            this can create a barrier both within and outside councils – small providers
            in particular cannot engage with the process if they do not have proper
            understanding of those processes (see Murray, 2011).
        •   Within councils opportunities for procurement and directorates to
            work together are often missed due to misunderstandings and excessive
            compartmentalisation of procurement and efficiency savings. Closer
            working would be beneficial in ensuring that cost savings and service
            improvement are better joined up.
        •   Commissioning should be provider neutral focusing on local need and the
            best pathways to deliver services that meet that need.
        •   Commissioners need not be councils as institutions but can be individuals,
            communities or councillors.
        •   There are a number of important questions that councils must address
            when shifting to a more strategic commissioning approach, including the
            extent to which council’s roles as both commissioners and providers are in
            conflict, and whether ‘externalising’ provision would enable a more effective
            strategic commissioning approach.

     The Benefits of Strategic Commissioning
     The main benefit of strategic commissioning is really the process itself. The
     systematic process of understanding need, the market, performance and an
     appreciation of available resources enables councils to focus on ensuring the
     delivery of quality services and value to communities. However, the process
     itself can also result in a wide range of benefits, including:

     • Greater efficiency – By taking a provider-neutral approach to the delivery
       of services, the commissioning process opens up new possibilities to deliver
       services in more efficient ways, such as through shared services or by
       capitalising on the benefits that the private, public or third sector can bring.
       It also potentially opens up opportunities to take advantage of initiatives
       such as pooled budgets, which can deliver financial savings across the
       public sector. Early intervention investment such as through social impact
       bonds offers another opportunity for councils to deliver long-term value for
       money for council-tax payers, transferring risk and capital investment away
       from local government in times of austerity, thus enabling them to deliver
       value in the long term as well as the short term.
     • A focus on outcomes, not processes – By studying the needs of local residents as
       part of the commissioning process, and by taking a long term, locally specific
       to the definition of ‘value’, councils can tailor the provision of services to
       deliver the most important outcomes for residents. This might mean that some

  services which have been delivered for historic reasons may be delivered
  in new ways to reflect changed circumstances, or in some instances not at
  all. On the other hand, some services might be perceived to be delivering
  more ‘value’ than was first anticipated, and there may be opportunities to
  extend that service to deliver further outcomes locally. In this way, strategic
  commissioning can justifiably claim to improve lives, and not just tick boxes.
• Stimulating local enterprise – By taking a comprehensive strategic
  commissioning approach, councils could leverage their significant resources
  and buying power to create new local markets in the provision of services,
  which could create new jobs and growth, as well as the potential to drive
  competition, choice and innovation in local services.
• Focus on what is strategically important – By ‘externalising’ the provision of
  services, there may be opportunities to resolve any conflict in the council’s role
  as both commissioner and provider of services. This may mean separating
  the council’s decision making function from delivery through an arms length
  organisation, for example. The benefits of such an approach may be both
  cultural and practical as the leadership of the council focuses on taking a
  strategic approach to delivering value for local residents.

   Key Lessons

   •   The main benefit of strategic commissioning is the commissioning process
       itself, which enables councils to think more strategically about how to best
       meet the needs of local residents.
   •   Strategic commissioning can also result in a number of other benefits
       including greater efficiency, a focus on outcomes and the stimulation of
       local enterprise.

Historical Approaches to Commissioning in Local Government
Despite the popular image of an inflexible sector, slow to change, adaptation
for local authorities in the way they deliver services is not something new. Local
government has already undergone a significant transformation over the last
20-30 years, and its number of statutory duties has doubled between 1997
and 2010.20 Modern-day authorities have long been open to working with
the private or voluntary sector to ensure the delivery of public services, and
for many decades this was done sporadically and at the council’s discretion.
However, the first major shift in terms of commissioning and procurement was
when compulsory competitive tendering (CCT) was introduced through the 1980
Local Government, Planning and Land Act. For local authorities, this initially only
applied to construction and maintenance (although it was often implemented
more widely), but was extended as part of the 1988 Local Government Act to
                                                                                       20 See DCLG ‘Review of
also include a greater number of specified services including cleaning, refuse             Statutory Duties on Local
collection, catering, grounds maintenance and vehicle maintenance.21 Following             Government’, http://www.
this a series of secondary legislative instruments ensured that by 1995 CCT      
also extended to sports and leisure, and a wide range of professional services             [01/07/11]
including legal, property, financial and personnel.22 However, it is worth noting      21 See Patterson, A. & Pinch, P.L.
that CCT in professional services was not widely implemented in practice,                  (2000) ‘Public Sector Restructuring
due to various complications such as pre-emptive voluntary agreements with                 and Regional Development: the
                                                                                           impact of compulsory competitive
preferred contractors and local government restructuring.                                  tendering in the UK’, Regional
                                                                                           Studies, 34(3), pp.265-275.
The introduction of CCT was part of the then Conservative Government’s                 22 Ibid.
efforts to restructure how public services were delivered and to reduce what it

                                                 What is Strategic Commissioning?

                                               perceived to be unnecessary waste in local government. It has been suggested
                                               that the Government introduced the legislation in response to limited pursuit
                                               of competitive tendering at the local level, despite what it perceived as the
                                               ‘overwhelming evidence of efficiency gains from competition’.23 This proved to
                                               be a controversial approach and some saw it as placing too much emphasis
                                               on cost, at the expense of quality. Since a key component was to ensure
                                               competition, lower bids from private contractors could not be rejected without
                                               ‘good reason’ and consequently, as revealed by research undertaken by the
                                               Department for Environment, around 91% of contracts were awarded to the
                                               lowest bidder in the first round of CCT. Considerations which were defined as
                                               ‘non commercial’ (such as pay rates and employee conditions) were not to be
                                               considered as part of the decision to award a contract.24

                                               Changing Perceptions of ‘Outsourcing’
                                               By the early 1990s the characterisation of outsourcing was starting to evolve
                                               from a purely transactional approach to something more collaborative. Ideas
                                               around partnership and collaboration, although not traditionally associated
                                               with competitive market economics, were also emerging as part of a desire to
                                               devolve responsibility for public services from the government to private and
                                               voluntary sector.25 In this way there was some recognition of the possibility for
                                               and desirability of outsourcing to achieve ongoing service improvement as well
                                               as efficiency. This trend was evident in New Labour’s ‘Best Value’ legislation,
                                               introduced in the Local Government Act, 1999, which was supposedly a
                                               response to the failures of CCT, but did not represent a significant challenge to
                                               the emerging orthodoxy.26 Under Best Value, each local authority has a duty to
                                               ‘make arrangements to secure continuous improvement in the way in which its
                                               functions are exercised, having regard to a combination of economy, efficiency
                                               and effectiveness’.27
     23 P arker, D. (1990) ‘The 1998 Local
         Government Act and Compulsory         Over the past several years then, there has been a discernable (if not wholly
         Competitive Tendering’, Urban         transformational) shift away from the traditional distinctions between public and
         Studies, 27 (5), pp.654.
                                               private/voluntary sector service provision. The standard perception that in-house
     24 S
         ee Patterson, A. & Pinch, P.L.
        (2000) ‘Public Sector Restructuring    delivery involves no external parties, and outsourcing is purely transactional,
        and Regional Development’              has been eroded somewhat throughout the Best Value era.28 The rise of public-
     25 F otaki, M (2010) ‘Towards            private partnerships in procurement was a key feature of this. Public-private
         Developing New Partnerships           partnerships come in a variety of different forms, including: strategic service
         in Public Services: Users as
         Consumers, Citizens and/or            delivery partnerships where partners each contribute a particular expertise
         Co-Producers in Health and Social     to some part of commissioning, procurement and delivery; Private Finance
         Care in England and Sweden’, in       Initiatives (PFIs), which are financially driven, and; purchasing consortia, which
         Public Administration, pp.1-22.
                                               focus more on economies of scale than delivery.29 It is interesting to note that our
     26 Local Government Association
         & CBI (2009) Commissioning            survey indicates, when procuring services externally, 44% of councils regularly
         strategically for better public       take input from providers when developing tenders – with almost 41% doing so
         services across local government      on at least an occasional basis. Public-private interaction then, is nothing new.
         (London: CBI), p.9.
     27 Local Government Act 2000
                                               PFIs in particular have attracted a lot of controversy. It is estimated that there
     28 B
         ovaird, T(2006), ‘Developing
        New Relationships with the ‘Market’    have been over 700 PFI schemes to date, including the construction of new
        in the Procurement of Public           schools, hospitals and prisons.30 The National Audit Office found that although
        Services’ Public Administration,
                                               unsuitable in some instances, PFIs can provide good value for money where the
        Vol.84, No. 1, p.84.
                                               government behaves as an intelligent consumer.31 Furthermore, there appears
     29 Ibid., p.85.
     30 C
         ave, R. (2011) ‘HM Treasury ‘in
                                               to be no intention for the Government to stop using PFIs, as in times of economic
        dark’ over ‘excessive’ PFI profits’,   downturn, they can also play a role in giving the public sector the chance to
        BBC, accessed at http://www.           access capital. However, as an August 2011 Treasury Select Committee report
                                               noted, it would seem that opportunities for the sector to harness its significant
     31 N
         ational Audit Office (2011)
        Lessons From PFI and Other
                                               spending power in intelligent ways have sometimes been missed. Further
        Projects, accessed at http://www.      attention will be needed in the coming years to identify and explore more [22/06/11]                  imaginative approaches to ensure that both public and private partners, as


well as local tax payers, can derive the maximum benefits, and balance short
and long term interests. According to a survey32 performed by Ipsos MORI in
2008 81% of PFI projects had not gone through any value-testing exercise
since they had been signed. Furthermore, the survey noted that 66% of the
sampled PFI contract managers devoted less than half of their time to managing
the contract; it also noted that 42% of the contracts sampled had failed to levy
any performance deductions in the past 12 months. These two statistics point to
the crux of the problem; contract management is woefully under-resourced and
contract managers are often unaware of their rights under the contract or how
to enforce them. Public sector contractual rights are going unused, and this is
the elephant in the room; there is an expensively negotiated contract gathering
dust at the bottom of a drawer that must be reviewed to unlock and ensure full
value and excellent service for the public sector.

Towards a Joined-Up Approach
In line with this emerging outcomes focus, the last few years of the Labour
Government also saw a growing emphasis on engaging with the community in
order to identify and understand these outcomes. An important aspect of this was
developing a shared understanding of local need which partners could draw
on in their efforts to promote better health and wellbeing. The Local Government
and Public Involvement in Health Act 2007 set out the requirement for a Joint
Strategic Needs Assessment (JSNA) to be carried out by local partners with
stakeholder involvement and engagement.33 The JSNA was intended to identify
areas for priority action and help local commissioners and providers to shape
services to address these priority needs.’34 It was, in short, an attempt to recast
the user as a potential shaper.

In 2008 this emphasis on local consultation was extended to apply directly to
the procurement aspects of commissioning. The statutory guidance on ‘Creating
strong, safe and prosperous communities’ expanded on the best value principles
in the Local Government Act and introduced new duties to ‘inform, consult, involve’
local people in decision making and the duty to create a sustainable community
strategy.35 Authorities were urged to ‘co-design/work’ with ‘representatives
of local persons’ in designing policies and services, in particular relating to
commissioning. As well as the emphasis on community engagement, there was
also a strong agenda for improved partnership working across the public sector.           32 PWC (2008), Is PFI working?
This was encapsulated in particular in the ‘Total Place’ pilots, launched in 2009             Buying Excellent, Settling for
which sought to explore how a ‘whole area’ or so-called ‘place-based’ approach
                                                                                          33 Local Government Improvement &
could deliver ‘better outcomes and improved value for money’.36                               Development, Joint Strategic Needs
                                                                                              Assessment (JSNA), http://www.
Consequently, the first decade of the 21st century saw an emergence of a more       
holistic approach to commissioning (including a greater focus on outcomes and
                                                                                          34 Department of Health (2007)
engagement), and a defined mandate for local authorities as place shapers,                    Joint Strategic Needs Assessment,
as part of the growing recognition of the role of public services in wider local              accessed at
economic development.37 It also saw increased emphasis, at a national level,                  uk/en [01/08/11]

on notions of ‘joined-up’ government: the idea that thinking of a problem in              35 DCLG (2008) Creating Strong,
                                                                                              Safe and Prosperous Communities:
the context of the wider system, rather than merely in and of itself, would lead              Statutory Guidance, http://
to greater efficiency across the board. It is increasingly acknowledged that        
investment in one area of policy can have a knock-on effect for another – for                 publications/localgovernment/
instance, housing on health, education on law and order – and commissioning,
                                                                                          36 HM Treasury & DCLG (2010) Total
by partially decoupling from the siloed cultures and structures of local                      Place: A Whole Area Approach
government, can make a telling contribution to this process.                                  to Public Services, http://www.
                                                                                              htm, p.14.
However, it is still important to note that the shift towards ‘strategic commissioning’
                                                                                          37 See Patterson, A. & Pinch, P.L.
has happened in the context of a move towards greater outsourcing of services.                (2000) ‘Public Sector Restructuring
This explains a great deal about why the term commissioning has become                        and Regional Development’

                                                  What is Strategic Commissioning?
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